Global Fashion & Luxury Private Equity and Investors Survey 2019

The unsteady global political scenario, the new commercial agreements increasingly introducing protectionist policies and the more and more pervasive use of advanced digital technologies are deeply influencing the business models in the luxury market. This is the scenario that global investors must face, and where investors interested in the Fashion & Luxury (F&L) industry must operate, as highlighted by the Global Fashion & Luxury Private Equity and Investors Survey 2019, the Deloitte report that analyzes the luxury market trends and the M&A activities of the sector.

While the luxury industry continues to be a fertile ground for investors this year, with a significant increase of 47 deals compared to 2018. In particular, ‘Cosmetics & Fragrances’ and ‘Hotels’ sectors have shown a substantial growth in the volume of M&A transactions, confirming they are the most interesting sectors for investors in 2018 globally. According to our survey, 70% of funds interviewed are considering investing in the luxury market in the coming years. Investors also expect the Asian and Middle Eastern regions to stimulate industry growth for the next three years. Also, the “Cosmetics & Fragrances” is one of the industries on which investment intentions are focusing for the next year, together with “Apparel & Accessories”, validating the importance of the Personal Luxury segment for the private equity world.

M&A Deal Monitor 2018: luxury hotels drive growth

2018 is another busy year for the luxury market, with a record of 265 M&A transactions, an increase of 47 deals compared to the previous year.

The Personal Luxury Goods deals increase (+11 compared to 2017) has been driven mainly by the Cosmetics & Fragrances sector (17% of total), which registered 44 operations in 2018. “Apparel & Accessories” (28% of the total) and Watches & Jewellery (11% of total), on the other hand, showed a decrease of, respectively, -4 and -1 fewer operations compared to the previous year.

Furthermore, M&A operations in the western regions rose sharply: in 2018 Europe (+41 deal) was the only area with a significant increase in F&L operations, while Japan and Asia Pacific have registered just two additional deals each with respect to the previous year. Globally, in 2018, luxury hotels were the main M&A drivers, with operations in all major geographic areas, as well as Apparel & Accessories.

In 2018, strategic investors led the merger and acquisition operations with a significant increase of 42 operations compared to 2017, mainly concentrated in the world of “Apparel & Accessories” and “Hotels”. Financial investors carried out 5 transactions more than the last year and represented the 44% of bidders, where the majority is composed by private equity and venture capital.

Investors continue to be optimistic: luxury market will grow between 5 and 10% per year

Within its F&L Private Equity Survey, Deloitte focused on understanding investors’ perceptions of the potential growth of the F&L market in coming years. The consensus view is that the main players in the Personal Luxury Goods (PLG) market are projected to reach 1.1 times their 2018 sales index by 2021 (~ + 4% CAGR FY 2018-21), while the other luxury sectors should reach 1.2 times its value (~ + 6% CAGR FY 2018-21).

Within the next three years, investors expect the F&L sector to continue its growth by 5-10% a year, confirming the 2018 forecast, according to the Deloitte survey. Cosmetics & Fragrances, Furniture and Digital Luxury could be the sectors with the highest performance, with a growth of over 10%. Slower, but still positive, a growth between 5 and 10% is expected for Apparel & Accessories and “out-of-home experiences”, such as luxury hotels and restaurants, which will be reinforced over the next few years. On the other hand, stability is expected for the Watches & Jewellery, Yachts and Selective Retailing sectors. On the contrary, investors forecast a slowdown in growth for the car and private jets market.

Investors expect the Asian and Middle Eastern regions to stimulate industry growth for the next three years, with growth rates that could exceed 10% on an annual basis. Limited development is expected in North America. Stability is awaited for investments in Europe, Latin America and Japan.

Investors’ interest in luxury sectors is increasing

In the survey conducted by Deloitte, the 70% of funds interviewed (-19p.p. than 2018) are considering investing in the luxury market in the coming years. Also this year the most attractive sectors are Apparel & Accessories and Cosmetics and Fragrances, which attract the greatest interest from investors (79% aim at investing in both) followed by Furniture (57%), Watches & Jewellery (36%) and Selective Retailing (29%).

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Karine leads Deloitte Private in Switzerland and is a member of the Swiss Executive team. She is an Audit Partner and Swiss Licenced Audit Expert with over 20 years of experience in the areas of consu... More

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